Kominfo Gives Warning to Foreign OTA Players, Must Register for PSE Immediately

The government is aggressively pushing for legal obligations for foreign technology companies operating in Indonesia. This time, the Ministry of Communication and Information (Kominfo) sent a warning letter to six Online Travel Agent (OTA) foreigners to register as Electronic System Operators (PSE) in Indonesia.

In the official broadcast, the six foreign Private Scope PSEs that received warning letters on March 5 2024 included Booking.com, Agoda.com, Airbnb.com, Klook.com, Trivago.co.id, and Expedia.co.id.

Kominfo gave these six foreign OTAs time to register for Private Scope PSE in accordance with applicable regulations within five working days from the sending of the warning letter. The government said it would provide registration assistance according to responses and requests from foreign OTAs.

"In the context of monitoring and enforcing the law regarding compliance with registration obligations, Kominfo has sent warning letters to six foreign OTAs on Tuesday, March 5 2024. If the six foreign Private Scope PSEs do not respond to the warning letters in question, then Kominfo can impose administrative sanctions in the form of termination of access (access blocking) to the electronic system," said the Kominfo statement.

The regulations in question are contained in Regulation of the Minister of Communication and Information Technology Number 5 of 2020 as amended by Regulation of the Minister of Communication and Information Technology Number 10 of 2021 regulating six categories of Private Scope Electronic System Operators (PSE) who are required to register, namely PSEs that have a portal, website, or applications on the internet network that are used to:

1. Trade in goods and/or services;
2. Financial transaction services;
3. Delivery of paid digital materials or content;
4. Communications (text messaging, voice and video calls, email, social media);
5. Search engine services, providing electronic information in the form of text, sound, images, animation, music, video, films and games or a combination;
6. Processing personal data for community operational activities related to electronic transactions.

This obligation does not only apply to domestic PSEs, but also foreign PSEs as regulated in Article 4 PM Kominfo 5.2020. In detail, Private Scope PSEs that are established under the laws of another country or permanently domiciled in another country but provide services in the territory of Indonesia, conduct business in Indonesia, and/or their electronic systems are used and/or offered in the territory of Indonesia

Domestic OTA

Having slumped during the Covid-19 pandemic, OTA is still one of the largest sectors of the digital economy in Southeast Asia. Based on the e-Conomy SEA Report 2023, the largest contribution of OTA GMV in Southeast Asia comes from accommodation which reaches 80%-85%, while the ticket segment is around 10%-15%.

Indonesia remains one of the highest OTA markets in the region with an estimated GMV last year of $6 billion. Meanwhile, total domestic tourist trips as of the third quarter of 2023 were recorded at 192,52 million trips.

Some of the big local OTA players are Traveloka and Tiket.com. Traveloka also has a subsidiary in the OTA sector, namely Pegipegi, however just closed at the end of 2023, while Tiket.com is affiliated with the Djarum Group which also oversees Blibli. Another player, NusaTrip, has just acquired an OTA from Vietnam called VLeisure.

Quoted Republika.com, The Indonesian Hotel and Restaurant Association (PHRI) is monitoring the impact of online travel agents (OTA). It is currently monitoring the presence of foreign OTAs in order to protect OTAs and domestic consumers. This is because foreign OTAs do not follow Indonesian tax regulations.